Which of the Following Actions Best Illustrates Adverse Selection

question 76

Multiple Choice

Which of the following actions best illustrates adverse selection?

• A)A person adds risky stock to his portfolio.
• B)A person who has narrowly avoided many accidents applies for automobile insurance.
• C)A person is unwilling to buy a stock when she believes its price has an equal chance of rising or falling $10.
• D)A person purchases homeowners insurance and then checks his smoke detector batteries less frequently.

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Definitions:

Bargaining Zone

The range within which parties are willing to negotiate and find an agreement in negotiations or bargaining scenarios.

Reservation Point

The lowest acceptable value or outcome an individual is willing to accept in a negotiation.

Conflict Management Styles

The approaches and techniques used by individuals or groups to handle disagreements, confrontations, or disputes effectively.

Conflict Situations

Circumstances that arise when the interests, needs, goals, or values of involved parties interfere with one another.